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You are a bond portfolio manager at Blackrock and the investment committee has asked you to buy a bond with price B1 and sell short a certain quantity N of a second bond with price B2:
-The bond with price B1 is a 1-year zero coupon bond with a yield-to-maturity y1= 1%
-The bond with price B2 is a 2-year zero coupon bond with a yield-to-maturity y2= 2%The resulting portfolio value is Π = B1 - N*B2
You are asked to choose N to optimally hedge the interest rate exposure of the portfolio Π and thus minimize its sensitivity to interest rate changes.
Find a numerical value for N, rounding your answer to 4 decimal places.
Butterfly Tractors had $17.50 million in sales last year. Cost of goods sold was $8.70 million, depreciation expense was $2.70 million, interest payment on outstanding debt was $1.70 million, and the firm's tax rate was 30%.
What is the GAO, what kind of reports does it provide, and how is it organized? Begin your search at www.gao.gov.
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